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Centrum Broking
Sundaram
Finance (Buy)
CMP: ₹1,855.4
Target: ₹2,030
Sundaram Finance Limited is engaged in financial and insurance activities. The Company’s segments include asset financing, insurance and other operations.
We retain Buy on Sundaram Finance (SUF) with SOTP based TP at ₹2,030. Second quarter FY18 results beat our estimates on all fronts — higher than expected earnings; strong disbursement/ AUM growth and stable asset quality. Housing business too saw growth accelerate with Q2 FY18 disbursements up 18.4 per cent y-o-y.
Other subsidiaries remain profitable. Strong capital position, best-in-class asset quality and superior returns profile remain key strengths for SUF. Value unlocking through demerger of non-financial investments into a separate entity could lead to further upside. Prefer Sundaram Finance in the NBFC space.
Key risks: Lower than expected growth or inability to contain NPA’s at current level.
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